from washington. they have a lot more meetings scheduled. walking next to rex tillerson, the secretary of state. much that is is so especially relevant to the financial markets where you have the further opening of chinese markets to the open market, the idea that there is a big elephant in the room, north korea, which has become more hostile towards the united states. there has been barred traded from president trump and north korea. -- barbs traded. it will be a bit more interesting to try to figure out and go through all the different news we will be following on how the meeting goes, link which from the president -- language from the president and secretary sta of state tillerson as well.

there's a lot on the table. you think about autos, agriculture, infrastructure. there's a lot of stuff here where xi jinping and president trump will try to find some common ground. this has been one of the more tense relationships as far as foreign relations. scarlet: president trump spoke with taiwan's president shortly after he won the election because that broke a cardinal rule -- the recognition of taiwan and taiwan's leader as an equal. china reminded him of that by telling him -- by not speaking to him for a couple of weeks. tocalled president xi reaffirm his position on the one china policy. let's get you to abigail doolittle with a check on the markets. less than two hours to go before the close of trading.

abigail: gains in the major averages. the dow, s&p 500 and nasdaq all up .3% or more. this comes after the bearish reversal yesterday. we are starting to seeee more volatility. we had the big selloff more than two weeks ago. volatility usually breeds volatility. today's calm may not last. more of a pullback is ahead. that point.port in orange, we have the vix. up top, we have the s&p 500 in white. over the last 12 months, when there have been big divergences among volatility has spiked higher as stocks moved lower. now, we have the big divergence

-- on the vix, we do have higher lows. the vix could spike higher as stocks moved lower. trade, of the trump stocks are possibly well higher -- some investors and saying they are looking elsewhere come --luding jeffrey good luck looking elsewhere come including jeffrey gunlach. on the bottom, we have the old world index along with the s&p 500. both up 5.5%. up top, we have the emerging markets index along with the european broader index. both of those up 10%. there is some outperformance there. there may be reason to go abroad for bigger u.s. equity returns. speaking of companies that have more of an international player -- breaking news. back to you. scarlet: we want to turn to the

story we've been covering all day. gary cohn's surprising comments. the former goldman sachs said to support the idea of separating investment banking from commercial lending. joining us is 1 wall st veteran who's been vocal in opposing glass-steagall. dick kovacevich, thank you for joining us. in the past, you've argued it carries little risk -- more than commercial banking. banks should be allowed to conduct both businesses to diversify their revenue streams. standpoint,atory why is it safer for there to be big banks that house commercial lending and investment banking? dick: that's what we have now. when we had glass-steagall, investment banks were by themselves come on regulated. -- by themselves, unregulated.

why would we want to resurrect that? we have two large investment banks, morgan stanley and goldman sachs, who are bank holding companies today. those holding companies are regulated by bank regulators. it allows them and the banks to be more diversified. what causes banks to fail is concentration of risk. you need a white brady of revenue streams so you aren't concentrated -- a wide variety of revenue streams. , being inercial bank the investment banking business diversifies their risk and gets a lot of fee revenue. for investment banks, it allows them to be in commercial banking enterprises so they can diversify their risk. the second reason banks fail is liquidity. investment banks generally do not fund themselves by customer

deposits but rather wholesale funding. the reason most investment banks fail is because they cannot roll over their wholesale funding were wings. dust borrowings in troubled -- wholesale borrowings in troubled times. a reason why you do not want to separate these two. it would increase the risk and we would go back to another troubled time like we did in 2008. oliver: you talk about the concentration of risk being a paramount concern in terms of figuring out the risk associated banks -- isn't not about the nature of the risk and whose money you will be using to take on those risks? isn't that part of implication -- whose money you are having access to? dick: i don't really think so. let's take commercial banking.

you have customer deposits. you have to manage that in a way that returns that money to the depositor. businesstional banking is a low risk business. it is fee-based. investment banks become risky because they take the low risk investment banking products and have a giant hedge fund inside cannot makehey enough revenue from just investment banking business. they take excessive risk to make up for that. when you put the two together, you reduce risk. the best example is canada. canada has had investment banking and commercial banking together for over 100 years. the bank has ever failed in canada. -- no bank has ever failed in canada. scarlet: you have john read

coming out against that big bank model saying glass-steagall should have never been repealed. is there a re-think among former leaders in the industry? dick: i don't think they --erstand the investment traditional investment banking is not a risky business. investment banking is not risky. investment bankers can be risky when they take excessive risk. they have to because they cannot get enough revenue to justify a $1 trillion balance sheet by using traditional investment banking products. that's why most investment banks today are boutiques. they don't do proprietary trading. do structured products and so on to the extent that investment banks have to do because they don't have enough products for customers. oliver: we've heard about the breaking up of banks from

democrats in congress. what if there is some common ground between the white house and him across -- and democrats? what do broken up banks look like? which banks do you see most successful -- as being the most susceptible? dick: the ones that would be the susceptible would be the ones like jpmorgan. they are big in both. they would be hurt the most by splitting it up. wells fargo would not be hurt nearly as much because we only have 5% of our revenues in investment banking. who gets hurtot and who does not. increase financial risk in the marketplace, make it

more difficult for customers to get what they want because all s are just bank another product in the capital stack. why should one entity provide the equity and bonds and the other one the commercial lending? the clients need both of them. oliver: i get your argument. scarlet: is their argument to be made that wells fargo, city, bank of america, jpmorgan, their business models might be more easy to understand if there's a split and therefore more attractive to wider base of investors? dick: this is not coming from the investment side. i believe the best thing for investors is to have a andrsified revenue stream provide your customers with all the financial products they need. banking is not a

complicated business. commercial banking is a very complicated business. you do not do anything for the commercial bank by taking away their ability to serve their customers with relatively riskless fee-based services. they take excessive risk because they don't have enough revenue streams. oliver: they talk about the volcker rule. if that goes, is there a stronger case for something like glass-steagall? or, can you have the repeal of one without the introduction of the other? dick: you can. the bulger will -- the volcker rule is too complex. it should say you are limited to 10% of your revenue from trading .

as long as it is below 10%, we will not try to figure out whether you are doing proprietary trading or just serving customers. about 10% of revenue, you have that tobe subject to make sure you are not doing proprietary trading. it is the size they should worry about them and not the activity itself. it wasn't proprietary trading or those activities that caused this crisis at all. dick kovacevich, thank you for joining us today. tomorrow, gary cohn will be joining bloomberg daybreak for jobs day. let's check on the first word news this afternoon with mark crumpton. mark: senate republicans have changed the chamber's rules to get neil gorsuch confirmed.

the gorsuch nomination fell five votes short of being advanced. and republican senators voted to a limited the filibuster rule -- eliminate the filibuster rule. the chamber has become increasingly partisan. >> how can we work together to repair trust so we can face the very real challenges we face? i was blessed to be joined by senators of goodwill and good faith and skill by both parties. but ultimately not successful. mark: devin nunes is recusing himself from the panel's investigation into russian interference in last year's presidential election. the california republican has been criticized over his handling of classified materials shown to him by white house staff. house speaker paul ryan says chairman nunes is making the

right decision. >> this process would be a distraction to the house intelligence committee's investigation into russian interference in our election. unes hasrman n offered to step aside and i fully support his decision. mark: he said today he would temporarily handle the inquiry -- hand the inquiry to republican mike conway texas. russian security agents arrested three people today with suspected links to the suicide bomber accused in monday's deadly subway attack in st. petersburg. they diffused an explosive device in the same apartment where the suspects lived. 50 were wounded. no one has claimed response ability. that's responsibility. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg.

scarlet: the stakes are high as china's president arrives in florida for his first meeting ever with president trump. we are live in palm beach, florida with the latest. this is bloomberg. ♪

scarlet: this is "bloomberg markets." oliver: chinese president xi jinping just arrived for his first face-to-face meeting with president trump. we are waiting for president trump to touchdown shortly. for more, let's go to kevin cirilli. he joins us from west palm beach, florida. let's talk about what's happening today. this is a big meeting.

arguably the most important meeting with a foreign leader yet. asin: definitely one of them the presidents of the two largest economies come together in west palm beach. ago, president xi touched down and was greeted by secretary of state rex tillerson. we are just moments away from air force one touching down. bysident trump is joined treasury secretary steve mnuchin, commerce secretary wilbur ross much you've of staff reince priebus -- chief of staff .eince priebus and steve bannon oliver: that is already a contrast to previous visits with foreign leaders. scarlet: are there any easy political victories

for either side to score? kevin: they hope not to have any political hiccups. the two main areas of focus will be foreign policy, with a particular focus on north korea and ways in which china and the united states can work together on north korea. we heard a bit of that yesterday. of course, it's all about trade. autoar energy and industry. the u.s. and china have been going back and forth, so to speak, in terms of economic policy. oliver: certainly not the left we will be hearing from you as we continue to watch the interaction between president trump and president xi. still ahead, a washington in.yweight wayweighs

's first interviews and leaving his post. this is bloomberg. ♪

scarlet: this is "bloomberg markets lastr unique insight, hour, former treasury in.etary jack lew weighed sec. lew: it is the first leading between the two leaders. it is important that they apportp a personal repo where they can do business. it's an important bilateral relationship in terms of global security. the list of issues confronting these two leaders is extremely important in terms of our -- and national

security as well. the stakes are very high for this to be a meeting where the leaders establish that kind of relationship. the preparation has been quite considerable. there has in the past been the expectation of clear deliverables, results at the end. i would expect this to be a more initial meeting. there is a way to work together going forward. hopefully stepping back from some of the rhetoric. >> there was a lot of forceful rhetoric on the campaign trail. how what you know about the chinese perceive what's going on in the u.s., how damaging has been? sec. lew: the chinese are very aware of american politics and they are willing to look at rhetoric for what rhetoric is an look at actions for what actions are.

coming out of this meeting is going to be very important in terms of sending a signal as to what kinds of actions the united states will take. that covers a whole host of issues. there's some room for space between the two. fundamentally, our economic interests have to be protected. we didn't pull back on criticizing china when we thought china was wrong. we also acknowledged when they moved in a positive direction. when we needed their assistance -- there will be issues on which we disagree. you have to be able to sort the two separately. david: the issue of currency -- you have chinaipulation with a trade deficit. is that enough to declare china a currency manipulator?

sec. lew: if you look at the generally considered part of the treasury's technical process, the key issue is are they taking actions to drive down the value of their currency to gain unfair advantage? the way you look to measure that -- in they intervening the last year, china has been intervening to prevent the devaluation. that makes it very challenging to look at the current situation and reach a conclusion that there is currency minute relation. clearly, there is a transition underway from a very managed exchange rate to a more market-oriented exchange rate. right now, the interventions are in the opposite direction from what you look at in terms of measuring manipulation. scarlet: that was former

treasury secretary jack lew speaking with david gura. next hour, we will bring you his comments on iran. still ahead, we have the commodities close. from new york my this is bloomberg. -- from new york, this is bloomberg. ♪

scarlet: from bloomberg world headquarters, this is "bloomberg markets." we have commodity markets closing in new york. under pressure after the

u.n. reported that stockpiles are headed or a 17 year high. inventory rising as production declines. partially because china and india are reducing their imports. gold edging higher today, recouping half of yesterday's drop. concerns that the meetings could be difficult. trump has blamed china formulating its currency and enabling north korea's nuclear ambitions. oil gaining for a third straight day. this is the backdrop for today's gains. the blue bars show the growing stockpiles of usw ti. the yellow line tracks opec production. the big drop late last year my december, the result of the cartel members and nonmembers reducing their output.

oliver: china is the biggest export market for u.s. -- american beef has been banned in china for years. joining us now from washington is bloomberg's u.s. agricultural trade and- you have currency minute relation. are we talking about beef? >> there's been reports coming out that president using will offer some sweeteners to president trump. -- president xi jinping will offer some sweeteners to president trump. donald trump's ambassador to china is a former governor of iowa. a major producer of corn and soybeans. u.s. farmers are pretty front by extension, that is on donald trump's plate as well. this is a big deal to the u.s.

even without beef and raising protein consumption in china becoming a potential growth market for u.s. producers. scarlet: china is still closed to u.s. beef and also u.s. chicken feed. to grantens for china access to both of those commodities? comes down to it the details in terms of what you do with traceability. standards aslity far as where the beef comes from, tracing it back to the field and the cow. that's not something a lot of countries figure is adequate to their standards. china is looking for a new system. the ban on u.s. beef was lifted last september. it's the traceability rules that are holding back the opening of this market. the chinese will be interested in hearing what the u.s. is going to do. the mad cow breakout was

more than a decade ago. there are still some cards preventing the beef from being imported. are they hurting their own farmers or agriculture system by taking on imports? if you had greater consumer acceptance of usb been china. beef production in china. exporteris the biggest -- once they took over smithfield, a lot of u.s. production practices came into china. in beef, you don't see that changing system yet. you could see the chinese hoping to learn some tricks from the u.s. industry if only first they could assure consumers that this is the way you should do it. opening the market to the u.s. would help meet chinese demand and keep consumer prices low and

give a greater opening for u.s. production practices to be more widely adopted in china. been talkinge about u.s. exports to china. the bigger story is u.s. producers and their ability to export to the region, to asia overall. president trump withdrew the u.s. from the tpp. how did that hurt u.s. competitiveness in the region? >> in his of great frustration -- it is of great frustration to u.s. farmers right now. without tpp, even though china was in a partner much of the region in general, it cost u.s. exporters an estimated $5 billion of additional income. have access to these markets -- if you get openings from president xi jinping this to talk with president trade, it would be a

way to placate these farmers who be like donald trump hasn't had them front of mine when it comes to their trade concerns. let's get a check of the other headlines on bloomberg first word news at this hour with mark crumpton. mark: the kremlin is accusing president trump of rushing to judgment in regards to the apparent poison gas attack this week in syria. a kremlin spokesperson said no verified information is available and he called president trump's remarks premature. the president condemned tuesday's attacks. the united states has expelled a russian spy who allegedly tried banker well really serving as a russian agent.

he was convicted of spying and spend 30 months in prison. he and two others tried to recruit carter page before he served as one of mr. trump's advisors. cois fillonfranc is campaigning for a more united europe. frexitwarned that a would lead to chaos and the end of the eu. stunning news in the world of sports -- the number one golfer has withdrawn from the masters, walking off a day after he injured his back in a fall down a staircase. he changed his mind at the last possible moment. his agent says johnson was injured after a serious fall

rental home his near augusta, georgia. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. oliver: coming up, we will be speaking with marcos galperin. this is bloomberg. ♪

oliver: this is "bloomberg markets." scarlet: let's head to abigail doolittle for today's sectors by to report. abigail: we have the xl y and x rt.

march same-store sales came in less bad than feared. let's look at the big winners. l brands trading higher by 10%. an analyst told me she's not entirely clear why investors are so excited here because there was a mess. that's a mess. miss.re was a investors like this space. that strength is helping gap and under armour. bed bath & beyond and costco both beat in a big, significant way. beatte the 10 basis point relative to same-store sales for the fourth quarter, it didn't slow down to margin -- there's

earnings pressure. today, investors are liking the stock. they are also liking costco. same-store sales of 6%. lots of strength here. it extends to the department stores. kohl's on pace for its best day of the year. jcpenney and nordstrom's trading higher. perhaps the strength for these other retailers is pressuring some of the shorts on the stocks bearish bets. jcpenney 33%. for nordstrom, 25%. amazon is suffering a little bit. let's hop into the bloomberg and take a look at 5582. this chart suggests e-commerce is the way to go.

e-commerce sales up close to the 10%. a big switch over the last 20 years or so. e-commerce is taking a bite out of those department stores sales. today, the department stores are trading well. oliver: let's head down to one os aires.- buen is ceo of mercadolibre standing by with erik schatzker. k: thank you very much. i'm here with marcos galperin, the ceo of mercadolibre. your company is the largest e-commerce company in latin america. outside the region, it is mostly unknown. mercadolibre is most like which of the above, ebay, amazon or alibaba? marcos: a combination.

maybe like alibaba because we don't have a first party inventory. it's also like ebay. -- not soed prices much auctions. it's a marketplace part of amazon. k: because you represent third-party sellers, the preferred metric is gross margins. amazon wants to expand south of the border. are you running into amazon more and more? marcos: they want to expand everywhere. yes, we are. >> what is your strategy? marcos: the same strategy we've always had to maintain leadership which is focused on our users, we try to do the best we can and focus on our product and deliver a lot of inventory, great service. the rest will take care of itself. i'm sure jeff bezos would

say he's trying to do the same thing. what are your strategic priorities? marcos: we have a huge opportunity in payments and financing. we've created a large platform and let america. -- in latin america. we had 28 million buyers and 8 million sellers. it is very synergistic with our business. we started experiencing providing financing to merchants in brazil. it's a huge opportunity. then, we will sector ties -- securitize loans. the faster people get their stuff, the more they buy. >> how big is your credit business right now? marcos: it is small, but sizable. we started 10 months ago. last year, we basically did $10 billion of gross merchandise

volume. we are growing very fast. the opportunity is big. could you expand into the united states, especially using the network's you've built a mong latin americans? marcos: we see so much opportunity in the region. not only in growing e-commerce e-commerce, growing financing. we have the largest digital payments platform. driving off-line to online. there's a lot of value in being the leader. we want to focus on latin america and maintaining leadership in the region. erik: your company is growing up 42% last quarter. some people call it the law of

large numbers. as you grow larger, does your growth rate have to slow? marcos: our numbers in relative terms are not a large. relative to the opportunity in the region, they are not that large. we've never grown faster than what we are currently growing. the two countries where we are growing fastest are brazil and mexico, our largest markets. we are a long way before we reach that level. erik: what about margins? are you a believer that investing in growth and expanding and deepening your network is what matters most? that in abelieve moment where we are committed doesn't make sense to optimize profits. we are just starting and we are trying to build a company that around for the next 100

years and let america. it would be a huge mistake to try to optimize profits at this stage. there's so much opportunity. we don't want to focus on margins. we've always been profitable. we like being profitable, it gives us independence. some he says your margin is my opportunity. erik: why pay a dividend? most companies should have something better to do with their capital. marcos: 25% of net income historically -- we have hundreds of millions of dollars of cash in the bank. question.ilosophical in public companies or the founder is not the majority owner, it has to aligne interests between shareholders and customers. ,rik: that is marcos galperin

the ceo of mercadolibre. oliver: thanks to erik schatzker with mercadolibre ceo marcos galperin. hearet: coming up, we will what the hyperloop one ceo says about building a system in the middle east. ♪

oliver: rex tillerson is making a statement in florida. himetary tillerson: to join here at mar-a-lago. he will spend time with their chinese counterparts. it will be very useful to all of us. it is an honor to receive the chinese delegation at mar-a-lago and build on the dialogue i began last month in beijing with president xi and other leaders in china. in the past 40 years, the united states and china have developed deep ties. this administration is committed to ensuring these ties for the next 40 years. we do desire to establish policies that maintain a constructive, cooperative and results oriented trajectory. high on the list of our priorities is an economic relationship that is fair on both sides. today will be a time to

exchange candid views on the u.s.-china relationship and we look forward to additional discussions in the future on topics of mutual importance. as president trump has said, the chief goal of our trade policies is the prosperity of the american worker. pursue end, we will economic engagement with china that prioritizes the economic well-being of the american people. we are also looking to make progress on china does with china on areas of foreign policy, those that serve our interests as well as the region's. we are hopeful that china will find ways to exercise influence over north korea's actions to dismantle the nuclear weapons and missile technology programs. whether it is using their authority on the u.s. secret he council --t security china can be part of any strategy to end north korea's reckless behavior and ensure and economic prosperity

in northeast asia. desire to work together, the united states does recognize the challenges china can present to american interests. we renew our strong commitments to our allies in asia and around the world as valuable partners in preserving shared values and security interests. the united states will protect our citizens and our institutions against cyber attacks. on other areas of disagreement, the united states will be firm in representing our core democratic values and advocating for the right of all people to live in freedom. the trump administration remains dedicated to working with china toward mutual goals of respect, security and prosperity. we will not shy away from frank discussions which are necessary to narrow our differences. thepe president xi and

first lady and the entire chinese delegation enjoy their visit to the united states and we look forward to our discussions with them. thank you. obviously, the events in syria with the chemical weapons -- chemical weapons attack or a fight all of us. -- horrified all of us. and brought to the front the tragedy that is part of the syrian conflict. there is no doubt in our minds and the information we have that syria what the syrian regime under the leadership of president assad are responsible for this attack. further, it is very important that the russian government consider carefully there continued support for the assad regime.

assad's role in the future is uncertain, clearly. with the acts he has taken, it would seem there would be no role for him to govern the syrian people. >> [indiscernible] >> the process by which assad would leave is something that requires an international community effort, both to first defeat isis within syria, to andilize the syrian country avoid further civil war and worked collectively with our partners around the world through a political process that would lead to assad leaving. >> will you and president trump organized international coalition to remove assad? >> those steps are underway. >> has president trump been talking about that with other leaders? -- therelitary strikes

are reports of today. >> we are considering ther appropriate response to this chemical weapons attack which violates international norms and long-held agreements between parties including the syrian regime, the russian government and all other members of the u.s. security council. it is a serious matter that requires a serious response. thank you. >> thank you, everyone. >> is that a military response? scarlet: that was rex tillerson speaking to the press -- he made some comments on the arrival of china's president in florida. we also saw live shots of the president arriving in palm beach, west palm beach. the president disembarking air force one an hour after president xi arrived. syria -- hes about

said the events in syria horrified us and there's no doubt that the assad regime is responsible for it and his role in the future is uncertain. the process by which he will leave will require international cooperation. oliver: he said it was under way . scarlet: when asked if you've started organizing an international coalition to remove him, those steps are underway. decision.pretty big conflict --e syrian there's a lot at stake. the relationship between the u.s. and russia -- what implications will interaction and involvement by the u.s. in syria have on this relationship? always news when we get comments from tillerson.

very unique secretary of state. his comments on north korea yesterday were very short and concise. scarlet: 156 characters. usually, a twitter comment is 140 characters. tillerson said the russian government should reconsider its support of assad. a bit of a surprise there and not something we expect to hear from rex tillerson today. the secretary of state has been very mindful mustang behind the scenes to do what he does. -- staying behind the scenes to do what he does. oliver: there was a lot of direct attribution. , the assad regime is responsible for the attack. he pointed out the russian government should reconsider support of assad.

although there is this degree of conviction there that is very interesting, it is certainly new. the news over the weekend was the use of chemical weapons. the lives that were lost, women and children. we still have this meeting with president xi getting underway shortly. oliver: the president still -- scarlet: the president still in the aircraft, arriving at west palm beach international airport. one hour earlier, we saw president xi jinping of china arrived to greet fans at the airport. president trump ready to disembark. he will be meeting with president xi jinping this afternoon at mar-a-lago. oliver: we saw tillerson walking with president xi. giving us an idea of what could be on the table here as he's hopeful china will find a way to influence north korea.

obviously, that is going to be a point of paramount concern here. the doors opening as president trump gets ready to disembark. we want to bring in michael mckee, our chief international economics and policy correspondent. so much of the focus has been on what the white house will discuss with president xi when it comes to economics because of all the discussion on whether china is a currency manipulator or not. yet, rex tillerson just said there will be candid views to be exchanged between the u.s. and china. i have not heard the trump administration saying anything regarding human rights in china until now. : that had not been included on the list of things the u.s. was likely to talk to the chinese about. obviously, the trade issues and north korea and the geopolitical

questions, arms sales to taiwan by the u.s. and chinese ventures into the south china sea. the trump administration would like to achieve some agreements or some coming together on the other issues. oliver: i wonder if the events in syria brought that into focus as we deal with human rights and andss how the entire region our equivalence abroad will be going with that. equivalents abroad will be doing about that. mike: the easiest thing he can do is put up a chart of the chinese yuan. china has been doing its best to prop up the currency. that is the issue here. the chinese are not manipulating the currency to their advantage. they did. they are not doing that anymore.

china has some issues they would like to settle with the united "leave uscluding alone in asia." , america first thing. if they can reach agreement, it may not be good for u.s. long-term interests, but it would be good for chinese interests. the chinese will bring economic benefits to donald trump, suggest investments in the u.s., job-creating, terrace-lowering or market access opening in their meetings. -lowering, or market access opening in their mee tings. >> the trump president is meeting with xi jinping in mar-a-lago clear what do you think in terms of the fact that rex tillerson is here for this meeting? you also have steve mnuchin.

it is taking place in florida, not the white house, but there is a big retinue of officials who have accompanied him. mike: the president does not have a lot of officials in his government. he needs everybody he can get. there is nobody at the state department or treasury underneath the secretary level. that makes it very difficult to put together a negotiating team to make progress on trade issues were other issues like that. tillerson is important because if the trump administration says, they want to do something about syria, and they want to do ,t through multinational forums they will need the chinese in the u.n. to go along. that raises hope tough you can be -- questions on how tough you can be in china if you want them to go along with you on syria. there are contradictions in this, but the governance have interest rather than specific

positions. it will be interesting to see how they play this out without a lot of expertise on the china front. i want to bring in some headlines. the president was speaking to reporters. he declined to say what he will do on syria, but the chemical attack was an attack on humanity . when you compare that with what rex tillerson told about the assad regime being responsible, they set up a contrast. mike: lots to discuss. thank you so much for joining us. >> let's look at the potential market impact. we bring in david lou. america,m bank of merrill lynch. we are talking about the upcoming meeting. what do you expect, what will be the most important from your point of view when we are dealing with currencies and market? david: are they going to be able

to come to an agreeable sort of handshake, you know, about the relations between u.s. and china going forward? plan.has got the 100-day what is interesting, not much what he did but what he did not do. the item that he were night on was the promise to label china as a currency manipulator in his first day in the white house. to the administration has been pursuing a pragmatic approach in terms of dealing and handling china. we had president trump called president xi and changed his mind, he would honor the one china policy after all, and then china suspended imports in north korea. then the north koreans are accusing china of pandering to donald trump. so a more pleasant surprise so far is they are basically proceeding in terms of diplomacy with china with pragmatism. reporter: because you pointed at he dropped his promises as

currency manipulator, is it to remove tension, or is it back up in the factory? cook upou can always some reasons, but it is pragmatic because we knew that the chinese might feel they have to do something legal. so not only the fact that they have not done -- trump has not pulled his punches, and we will talk about where they have come around, there is a lot of areas on mutual influence. north korea. this is where the u.s. will need help from the chinese to get the situation under control. a lot of people are too young to remember, during the george bush , ther administration chinese situation was ballooning. there would be a shopping trip aircrafts., buy 200

from boeing, then whatever else. so i think the chinese, they will come with a similar gesture. they will invest in america, u.s. infrastructure. i think we should assume at this point there will be a lot of good on both sides to make this work. scarlet: pragmatism on both sides. koreannt out a north provocation during the xi jinping-trump meeting could provide an opportunity for investors. in the past, north korea has done something like saber rattle, the markets don't really react. what would north korea have to do for the fx to react in a meaningful way? david: if they did something if theyuld not be -- were to fire something like on the 15th of april we have the birthday of the supreme --

basically a father of north korea. people think, the north koreans have threatened to fire one of their iv cm -- ibcm's, so korea could have the potential to hit the u.s. i think that is when the dire.ion becomes scarlet: you said donald trump would win, the markets would take off, that is what happened. crumbled,untry has the white house has not had a very good run with efforts to repeal and replace obamacare. you said that is the best thing to happen to the trump trade since the inauguration. why have odds of tax reform gone up? david: i have been arguing for some time now it is much more difficult to do health care reform than tax care reform.

especially with republicans having 52 seats in the senate. has been latep for this. the spirit -- he was confident to get it done this year, but he said we would do health care reform because it is more obligated. think my point of view, when the issues ultimatums, 10 days ago, you will vote tomorrow, or obamacare stays. it is a climb down from the impossible position which is repeal obamacare without being able to replace it. the president did not put forward an idea of his own. sean spicer made it clear that the white house would talk about tax care reform. this has been the most important. if the defined his presidency. -- this would define his

presidency. reporter: let's talk about tax reform and another area trump could disrupt. his affiliates around him have talked about border adjustment taxes, evening the playing field for trade. others say if this happens, we could net out evenly the impact by raising the dollar. what happens? david: i am totally against the border adjustment tax, because it only works if you think the dollar is going to go by 25%. i don't think i am any better than i was two years ago because the foreign exchange market is more difficult to forecast. so the intergenerational tax change is a laughable notion, not entirely ridiculous. from my point of view, the p.a.t. -- we are coming to that point where there are many reasons.

we could talk about it another time, but it will unleash a lot of unintended consequences and underwhelmed -- overwhelm the economy. u.s. households are setting up $20 trillion of foreign assets. if the dollar goes 25%, that is a $5 trillion hit on u.s. balance sheets. if the dollar goes up 25%, that is $100 billion on the earnings power per year, which is devastating for the market. vat could be the solution. reporter: what about the big u.s. companies that are on board ? david: exactly, but i told you even for exporters, think about this, companies that make a lot of money to oversee operations, if the dollar goes up, anyone making money outside the u.s., it is worth 25% less when they bring it back home.

-- companiesntries will not benefit that much. people start to see it does not make any sense, the vat. scarlet: u.s. holdings of foreign assets have been climbing. if you look at the foreign currency market, it is deep, liquid, huge, trade is a small part. it is financials that make up the bulk of turnover, which is why it seems more ridiculous from your point of view we can predict and count on a 25% increase in the dollar to offset vat. david: people are making the case including renowned economists, the dollar will go up 25%. if you put in the 25% tax on import, the dollar will have to go up 25% to equal the price. assuming it works, the daily foreign-exchange market turnover is about $4 trillion.

if you add up all of the goods and services per year, it is $5 trillion. this is a fraction of what goes on in the foreign exchange market every day. it is driven by financial flows. for the market to want to hold 25% more u.s. dollar assets, which is what you need for the dollar to go up, u.s. things look more attractive, lower stock prices and higher bonds. we have to be careful. reporter: when you talk about volatility, the effects of the trump administration seem to have muted volatility in many assets. aboutondering as we talk geopolitics, should we watch currencies? is it time to look at the potential hazards? --id: there is a possibility volatility parties because investors are in the waiting for more clarity on the tax reforms.

the question is, hopefully be get clarity, and at what point do investors give up or run out of patience? i think may will show us the moment. in order for this to be done before the summer recess, and there are reasons why i say that, we know the debt ceiling will be finding sometime in august. we know the freedom caucus has spent the last six years fighting against raising the debt ceiling. and assuming what the freedom caucus and did to the health care reform, i imagine the president does not want to be held hostage by the freedom caucus. they will do tax reform before august. if you want to do it before august, the senate will have something by july, the house will have something by june, meaning you need a plan by may. so to be realistic, may, we could see a concrete plan.

otherwise you see a tactical retreat. ,ou could seek a potential real a real rollback of trump things we have seen since the election. scarlet: thank you so much. we will look for in. reporter: always great talking with david. scarlet: head of fixed income strategy at bank of america merrill lynch. let's go to mark crumpton. mark: president trump is reportedly considering military steps in retaliation for a chemical attack in syria this week. that is according to cnn where they said although a decision has not been made, the president is discussing possible steps with james mattis. speaking to reporters aboard air force one en route to florida for his talks with china's president, mr. trump said bashar al-assad is running things, so something should happen. taxes like this week's in syria

should not be allowed to happen. senate republicans have changed the chamber's rules against neil gorsuch. -- nomination was followed five votes short of being advanced, but mitch mcconnell voted to eliminate the filibuster rule for nominees. >> we will not allow the latest unprecedented act on judicial nominations to take hold. mr. president, this will be the partisan last filibuster of the supreme court nomination. mark: a final confirmation vote is scheduled friday. british prime minister theresa may and european council donald tusk have agreed to stay in contact throughout brexit talks. they met in london for the first time since may triggered the start of negotiations.

she wants parallel talks on the exit and the future relationship. mr. tusk said a trade agreement can be finalized on the -- only after the u.k. leaves the e.u. ngst americans oppose fundi of the border wall. that is according to the associated press. they found the public opposes spending for the wall 58% to 28%. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. lose,: we hear from jack getting his first interview from leaving the post. what he says about north korea. this is bloomberg. ♪

♪ oliver: this is bloomberg markets. scarlet: sanctions against north korea may be a big topic as president trump and xi meet in florida. we spoke about the issue earlier. >> the relationship requires a lot of attention. i think that every relationship is based on personal interaction , but it is particularly important in china relationships. i think establishing trust and candor is important. it does not mean you use hard issues. the ability to press hard issues forward is increased when you have a relationship where there is that kind of confidence that you are basing your statement on facts and analysis and telling your counterpart what you think.

i think if you look at the u.s. strategic interests right now, ddrk issue is very large. the issues have to do with sanctions and corporation between the united states and china. we made a lot of progress in the last year of the obama administration thanks to the outrageous actions of the government of north korea. but we worked with china to get a un security council resolution . the substance of the agreement but also the process, china has a strong view that sanctions should be multilateral and not unilateral. this makes it easy to push forward than if you just had a unilateral action. in the last month we pressed very hard, china was taking accident had not taken in the past. there is more china can do, but pressing china to put its effort

into having the government realize the pressure will get greater and greater is the only way economic sanctions will have effect. reporter: it strikes me over the course of your tenure, this is something you relied on more than your predecessor spirit you saw sanctions as a powerful policy tool. how effective is that when you look back at it? jacob: you have to look at the point in time. two wars thatg left the country war weary, but we left with substantial threat we needed to respond to, and sanctions work available in a way they had never been before, because we fine-tuned the way we did sanctions to have them more morey engineered, unintended consequences. is no case of iran, there

-- united states was working with pressure on tamron, bringing them to the -- theran and getting it to back away from the nuclear program. when you accomplish the sanctions as i have said over and over again, you must provide relief, otherwise they are a useful tool. scarlet: that was jacob lew speaking. this is bloomberg. ♪

♪ oliver: this is bloomberg markets. scarlet: time for abigail doolittle. >> joining me for the option inside is the options strategist at delta derivatives. he joins me from the cboe in chicago. this is exciting. volatility, twice in a row. we had the bearish reversal, them major averages down. what is going on?

is it the fed? >> i think the fed made yesterday spark. you had big-time reversals, but more importantly, the trump trade has slowed down here. obamacare revealed not being central, took the wind out of the sails. i think we are stuck in the , 2350 on the s&p, around around 12, oil $50. abigail: let's get to the trump trade. the leading sector is financials, but they had their worst month since brexit as yields fell. if we see continued weakness, will that derail the rally, or what are you looking at? especially with earnings coming out. ahead,banks that way kind of like that intersect stocks, so that banks are settling in after the high.

the fed will probably raise but not as aggressively if we see weakness. we will come around these levels here. abigail: so when we have entered a volatility, amazon is down 10%, a rare down day for a stock that makes record highs. tim: absolutely. this is one that has certainly not been malaise. eight straight until today, stocks 3.3 sales, twice the of the sales. overbought on almost every metric. , like taking a bearish look the monthly 900, right at the money, selling extreme $890. look for amazon to continue to kind of selloff or hang around levels given the fact the stock is up 90 points over the past eight days. abigail: great stuff.

sounds like a bearish trade on amazon. that was tim victim of delta derivatives. scarlet: still ahead, we have the former into secretary nathan sheets -- undersecretary nathan sheets joining us. we will talk about this as president trump and president xi meet up. let's get a look at the market through the close. oliver: a lot of green, but not a lot. we have repaired hot the gains. still in positive territory. we have still got 30 minutes left. this is bloomberg. ♪

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into whether chairman nunes made unauthorized disclosures of information. he has been criticized by colleagues for sharing information with president trump before he showed it to the rest of the committee. the white house is pushing house republican leaders to make last-minute tweaks to their obamacare replacement bill before lawmakers leave washington for their two-week spring break. paul ryan says they are working on it as we speak. paul ryan: we have worked to get there. we have made progress this week. that is why we are here today. mark: it is unclear when the health care replacement bill would go to the house floor. welcomed wounded veterans and soldiers to the white house. he thanked them for their service and called the real heroes. he said you have earned your freedom with sweat and blood and sacrifice. today was a part of the